Conveyancing – Royalty And Mineral Deeds

Monday, July 6th, 2015

The mineral rights to a piece of property are often more lucrative than the surface. This calculation is especially true in oil and gas rich areas. If you are a landowner who has mineral rights to a piece of property above an oil or gas reserve, it is important to understand the mechanics of conveyancing with royalty and mineral deeds. There are key differences between these two deeds. These differences include the rights that are conveyed away. Despite the known differences between these legal documents, it is not always easy to tell them apart. If you are unsure about any legal language, you should hire an experienced oil and gas attorney to help you.

What Is A Mineral Deed?

The surface area of a piece of property and the minerals down below are considered two separate legal interests. These interests may be severed at any time by the landowner. If the owner no longer has any use for the surface area, but wants to reserve the mineral rights, he can sell the surface rights to the property while retaining the minerals.

Once the surface and mineral rights are severed, they must be handled as two separate legal entities. If the owner of the mineral rights ever wants to convey those rights to someone else, he or she needs to do so through legal documentation. This legal document conveys the actual rights to the minerals while still remaining separate from the surface rights.

A mineral deed can convey either 100 percent of the rights, or a percentage of those rights. If a percentage is granted with this legal document, then the holder of that grant owns that percentage. Mineral deeds can contain a warranty as to title or can take the form of a quitclaim deed, where title is not warranted.

What Is A Royalty Deed?

A royalty deed gives its holder the right to receive a percentage of the profits from the sale of the minerals, if and when they are actually produced. This kind of legal document does not convey all of the mineral rights to the holder, only the right to receive royalties. The executive right (the right to execute leases) and other mineral rights are retained.

What Are The Key Differences Between Royalty And Mineral Deeds?

The financial differences between these legal documents are one of the more obvious differences. With a mineral deed, the holder usually has responsibility for development and production of the extraction on the property. That risk comes with the potential reward of the majority of the profit that comes from it. With a royalty deed, the holder does not usually bear the risk of the development and production. However, that holder only receives a certain percentage of any profits.

Despite the known differences between royalty and mineral deeds, it is not always easy to tell which is which. Legal language used in individual deeds, especially from decades ago, can be imprecise. Just because a legal document says it is a “mineral deed” there is no guarantee that it is not a royalty deed. It all boils down to the exact language and the chain of conveyance.

If you have any questions or concerns about a royalty or mineral deed, contact us here at Brown & Fortunato, in Amarillo. Our Oil and Gas team of attorneys can help you get things figured out. Call us at (806) 345-6300 or visit our offices at 905 S. Fillmore, Suite 400, in Amarillo, Texas. You can also contact us via email.

This information is subject to change. Please check for updates that are more recent than the published date of this article.